(CNN) -- With the shadow of extremism reaching beyond the borders of Pakistan and India, analysts say the stakes -- as the nuclear-armed rivals try to hang on to an uneasy peace -- are higher than ever in the wake of the Mumbai attacks.

But, with world leaders urging restraint on both sides, fearing a return to the conflict and stand-offs that have defined 60 years of India-Pakistan relations, things are not off to a stellar start.

And if already heated diplomatic exchanges escalate further, analysts say tensions could have dire consequences -- affecting Afghanistan to the north and embroiling the West in new chaos as militancy flourishes.

Even before the attacks that left 179 people dead had stopped, India's government had made vague accusations against Pakistan, while TV stations aired pictures they said was evidence against the neighboring country.

The Pakistani government bided its time, listening to accusations before making it's first move: a confusing flip-flop.

India summoned Pakistan's intelligence chief to help with the investigation. Pakistan's prime minister first said yes, hours later he said no.

India meanwhile, has stepped up its allegations, calling on Islamabad to swiftly tackle the "elements from Pakistan" it blames for the bloodshed.

"The government expects that strong action would be taken against those elements, whosoever they may be, responsible for this outrage," India's foreign ministry said.

Hasty accusations and flip-flops are bad for trust, and that's what Pakistan and India have never had. The mistrust started with their violent separation in 1947.

Then came the territorial dispute over the prized Himalayan region of Kashmir, three wars, a nuclear face-off and decades of spying on one another through their powerful intelligence agencies.

Today many Pakistanis are convinced India wants to destroy their country. Many Indians feel the same about Pakistan.

This time failing to build trust and better relations could put one of the most important regions in the world in jeopardy.

If, as in the past, bickering leads to confrontation or worse, Islamist extremism could spread east and destabilize a global economic power in India, and devastate a fledgling young democracy in Pakistan.

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The impact would reach Washington. U.S. President-elect Barack Obama calls Afghanistan the central front on the war on terror. Without a stable Pakistan, there is no stable Afghanistan.

Optimists will say there are some positive signs. Before the Mumbai attacks Pakistan and India held unprecedented talks to improve relations.

Despite its initial flip-flop, the Pakistani government has repeatedly offered its cooperation in the Mumbai investigation if and when India provides evidence.

That evidence could show the attackers had links to notorious extremist groups in Pakistan. They could also show links to India's violent jihadi groups.

Analysts say that stakes for South Asia have seldom been higher and unless India and Pakistan are willing to set aside their differences, hopes for lasting peace could be dashed.

"The time to be either smug or sly with each other is gone, and the two countries and the two states must genuinely cooperate," said Naseem Zehara

But the enigma of extremism is no longer isolated to just one country. It's a regional problem and spreading alarmingly fast. Logic says Pakistan and India won't stop it if they're busy bickering at one another.